Employers face bumper payroll as holiday ruling bites

Businesses have been warned they must get themselves up to speed on a controversial ruling which may entitle millions of workers to more holiday pay to take into account their overtime and commission.

The European Working Time Directive (Directive) gives workers the right to paid annual leave but does not specify how holiday pay should be calculated. In the UK, most workers have a right to 5.6 weeks paid annual leave under The Working Time Regulations.

It had previously been thought that where a worker received a basic salary and commission payments as part of their remuneration, only the basic salary had to be paid to the worker during any period of annual leave. However, the recent case of Lock v British Gas Trading Limited held that commission payments should be taken into account when calculating the salary to be paid during holiday.

As a first step, employers must review their commission arrangements and determine whether they will affect holiday pay calculations. They must also take steps to review holiday policies, referencing periods and all contracts of employment so that holiday terms and calculations include commission.

CLICK HERE for a link to the key points of what is and isn’t included in holiday calculations at the moment. Also you can keep visiting ACAS website for any updates on legislation